Wednesday, May 12, 2010

Not-for-Profits ... news about fund raising, not about performance!

Dear Colleagues

There are very large capital flows in modern society ... the capital markets are big, but increasingly on top of a society that is in dangerous decline. Capital markets in Europe and North America increasingly are reliant on the economic performance of other regions, notably China, India, Russia and Brazil ... as well as the mineral and energy producing areas of the world. Arguably not a very stable arrangement.

In spite of this the capital markets help with philanthropic support of the not-for-profit sector. Today the Chronicle of Philanthropy reported another fund raising success:
May 11, 2010, 01:50 PM ET
New York Charity Gala Raises $88-Million to Fight Poverty
This week's annual Robin Hood Foundation gala raised more than $88-million for the New York charity, up from last year's gala total of nearly $73-million, reports Bloomberg.

The foundation supports 200 poverty-fighting charities in the city and is supported heavily by Wall Street executives and hedge-fund managers, the news agency reports.
One of the issues with not-for-profit activities that are doing good works is that fund raising is a big challenge and philanthropy is a key part of the money they need to operate. Not-for-profit reporting is largely geared to making the organization attractive to donors ... and over the years this has essentially replaced serious accounting and accountability about performance and the impact on society that is being achieved. In response to the news item I have written as follows:
Dear Colleagues

The Chronicle of Philanthropy is great about sharing data about fund raising, and these stories are quite inspiring ... but there is something missing.

When I listen to news about corporate organizations, the key information is the profit they have earned, and then the impact this has had on the capital markets. Yes ... these stories do include revenue and capital raising, but the meat of the story is always the performance ... the profit.

In the philanthropy space there is very little about socio-economic impact ... about performance. Where this is mentioned, the metrics are hardly credible. A story about good work is commonplace usually with a graphic image, and certainly this attracts donors by connecting emotionally ... but does philanthropy really deliver serious value for society, or is it really nothing more than a "feel good" retirement game.

I argue that resource allocation to important matters in the global society is very serious work ... and that there should be solid verifiable metrics about socio-economic progress and performance. This can be done, but it is a paradigm shift ... with few of the establishment organizations really interested in taking the risk. As a result ... allocation of resources in the philanthropic space is likely not doing half of what is possible.

Hopefully something like Community Analytics (CA) can be used one day so that the impact of not-for-profit activities can be measured in a meaningful way. These value measures can be a long overdue game-changer.
My one line conclusion about the state of not-for-profit reporting is that their accounting and accountability for performance is ready for reform. It is time to get serious!

Peter Burgess

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